MEDISYS
TECHNOLOGIES,
INC.
1997 ANNUAL REPORT
<PAGE>
United States Securities and exchange commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-21441
MEDISYS TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Utah 72-1216734
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9624 Brookline Avenue, Baton Rouge, Louisiana 70809
(Address of principal executive officers) (Zip Code)
Issuer s telephone number: (504) 926-0422
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.0005 per share
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of registrant s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year.
$97,634
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such stock,
as of a specified date within the past 60 days. $2,682,410 (Based
on price of $.43 per share on April 13, 1998)
State the number of shares outstanding of each of the issuer s
classes of common equity, as of the latest practicable date.
Class Outstanding as of December 31, 1997
Common Stock, Par Value $0.0005 13,120,810
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format. Yes [ ] No [X]
<PAGE>
MEDISYS TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . 18
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . 19
PART II
Item 5. Market for Registrant s Common Equity and
Related Stockholder Matters. . . . . . . . . . . 19
Item 6. Management s Discussion and Analysis of
Financial Condition and Results of Operations. . 20
Item 7. Financial Statements and Supplementary Data. . . 23
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . 42
PART III
Item 9. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . 42
Item 10. Executive Compensation . . . . . . . . . . . . . 45
Item 11. Security Ownership of Certain Beneficial Owners.
and Management . . . . . . . . . . . . . . . . . 47
Item 12. Certain Relationships and Related Transactions . 48
PART IV
Item 13. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . 49
Signatures.. . . . . . . . . . . . . . . . . . . 50
<PAGE>
PART I
Item 1. Business
Medisys Technologies, Inc. ( Medisys or the Company ) is a
specialized medical device company. It's strategy is to identify
and participate in markets within large growing categories of
medical care where it can maintain a competitive advantage.
Medisys acquires and develops proprietary products for
commercialization grouped in those identified markets which can be
efficiently exploited using management disciplines of market driven
business units ("MDBU"). Medisys believes strongly that
significant opportunity lies in building a market driven company
that consolidates product opportunities in large markets and
develops marketing leverage/synergy in those markets.
Initially, the Company is focused on the specific market
segments of Women's Health (birth assistance), Medical Safety and
Lifeline Management which are contained within the broader
categories of women's health and minimally invasive patient care.
The Company's proprietary products within these areas provide a
base for creating synergistic multi-product specialized business
units. The Medisys strategy is to maintain an aggressive
acquisition program focused on products available within target
categories. The Company will continue to explore opportunities
within the medical device industry to create subsequent market
driven business units.
Medisys recognizes the opportunity for the acquisition and
effective marketing of medical devices. Within this highly
fragmented industry are many small companies with products which do
not have product synergy to leverage cost or generate market
impact. In addition, there are many products which do not meet the
large scale criteria of the major medical device companies and are,
therefore, available for acquisition. Medisys will identify,
acquire and commercialize carefully selected opportunities grouped
into specialized business units which deliver cost effective,
competitive advantages in each market.
The Company targets niche market segments which are not the
focus of multinational companies. By participating in large
growing markets with specialty proprietary devices, the Company can
build a substantial business presence while minimizing the risk of
competition. Using existing technology adaptive to innovative uses
and avoiding a dependence on, future technology, the Company
reduces the risk and expense of regulatory development inherent
with new inventions.
The Company was incorporated on March 17, 1983 under the laws
of the State of Utah as Whitewater Products, Ltd. and initially
engaged in the business of manufacturing and marketing sporting
goods, primarily sailboards. The Company subsequently ceased its
original business activity in 1985 and thereafter primarily
investigated and sought new business opportunities and was
reclassified as a development stage Company as of March 1, 1989.
On August 6, 1992, the Company acquired Medisys Technologies,
Inc., a Louisiana corporation, engaged in the business of
developing a device for the assistance of childbirth under a patent
which was applied for in May 1990 and granted on June 15, 1992.
Subsequent to the acquisition, all of the Company s activities have
been related to the development of medical devices for use
primarily in the Women s Healthcare and Medical Safety Device
markets. For accounting purposes the acquisition was treated as a
recapitalization of Medisys-Louisiana with Medisys-Louisiana as the
acquirer (reverse acquisition). The acquisition was perfected by
a share exchange, which resulted in former Whitewater
shareholders owning 7% of the shares in the new company in the
aggregate, while former Medisys shareholders owned 93% of the
shares in the new company, in the aggregate. Also on August 6,
1992 the Company changed its name to Medisys Technologies, Inc.
During 1997 and 1996 the Company spent $88,219 and $496,446,
respectively, on product research and development costs.
Primary Products:
WOMEN S HEALTH - SofCeps
The Company is the exclusive assignee of all rights in and to
certain United States patents for an obstetrical tractor (birth
assistance delivery device) known as SofCeps which, in part, is
designed to replace traditional steel obstetrical forceps and
vacuum extractors used to assist child birth. SofCeps is intended
to offset the possible negative obstetrical consequences of
epidural anesthesia which may slow or interrupt the descent of the
fetus through the birth canal and may diminish maternal ability to
produce voluntary and involuntary contractions during delivery.
SofCeps is a disposable soft and thin double-walled multifiber
braided axial gripping cylinder which is placed over the fetal
skull with a simple application system. It is designed to
uniformly distribute assisting traction forces about the
circumference and longitudinal surface areas of the fetal skull.
The predecessor devices that SofCeps is designed to replace
are traditional steel obstetrical forceps and vacuum extractors and
the Company believes that maternal/fetal injuries associated with
the use of these predecessor devices will be reduced with the
adoption of this new alternative device. Maternal injuries
potentially caused by forceps, or by their improper use, range from
spiral lacerations of the pelvic floor and its associated
structures, to severe lacerations of the cervix resulting in
increased in-patient time, major surgical repair, incontinence,
sexual disorders, protracted discomfort, death, and substantial
increases in health care costs. Objective fetal injuries
potentially secondary to the use of forceps include minor "forceps
marks", fractures of the fetal skull, central nervous system (CNS)
deficit (cerebral palsy), severe mental retardation, blindness,
deafness, and death. Subjective injuries may include slowed
development of motor skills and learning disability. The use of
forceps when the fetus is at or above the midplane of the pelvis is
proscribed under current standards of care in the practice of
obstetrics.
The vacuum extractor was developed as an alternative to
traditional steel obstetrical forceps, but after over thirty years
of development its use still presents potential clinical problems.
The operative feature of the device is basically a suction cup
which is applied over the crown portion of the fetal skull where
traction forces are concentrated. Traction can result in hydraulic
transfer of traction forces through the fontanel to the
intracranial area. Off axis traction can result in the device
"popping" off the fetal skull with secondary rebound trauma being
transmitted to the intracranial area. Hematomas over the skull
have been noted secondary to the use of the vacuum extractor. Use
of both forceps and vacuum extractors requires a high degree of
skill and training.
When the mother opts for epidural anesthesia during delivery,
as most do, arrest or substantial delay of fetal descent in the
mid-pelvis range of the birth canal frequently occurs and the
obstetrician has no means available to beneficially promote
descent. In many cases delivery will be unduly prolonged and the
physician must resort to Cesarean section delivery. Unlike
traditional forceps, SofCeps can be applied when the fetus is at
or slightly above mid-pelvis of the birth canal, thereby providing
the obstetrician with an in place device to which traction can be
applied to offset the arrest or delay of descent. The Company
believes this will result in significant reductions in the rate of
Cesarean section deliveries secondary to arrest of fetal descent in
the mid-pelvis range.
The use of outlet forceps has become so much a part of normal
obstetrics that it is considered by some to be a part of a normal
delivery. Up to 1975, the use of forceps at all levels was
reported in the United States to be as high as 25% to 33 1/3%. By
1980, one study showed a 26.7% forceps use in "first child"
deliveries and over 15% in all deliveries.(1) The Company estimates
that the percent of forceps deliveries in the United States today
is somewhere between 12% and 26%, depending on the region of the
Country surveyed. In recent years there has been a surge in
Cesarean section births in the United States. As the Cesarean
section rate increases, the use of obstetrical forceps tends to
decrease. Studies indicate that vacuum extractors delivery rates
are roughly equivalent to forceps delivery rates.
SofCeps combines centuries old non-obstetrical concepts with
modern medical and engineering technology. Using state of the art
braiding technology, a soft, thin mesh cylinder of synthetic fabric
is fabricated for application over the fetal head. Application is
accomplished with a simple and effective system which includes
accommodation for cephalic curvature. The application system is
then removed. After application, assisting traction is applied by
the physician to the portion of the cylinder which protrudes from
the vagina. A unique traction handle permits anterior, posterior,
or lateral traction as required to promote fetal descent. As
assisting traction is applied, the cylinder exerts uniform axial
gripping about the circumference of the fetal head. Unlike steel
forceps, gripping forces are not point concentrated but are spread
evenly over the fetal head and facial surfaces. Importantly,
traction can be applied concurrent with expulsive maternal
contractions thereby permitting efficient use of maternal reserves
of energy. The device has no edges which can cause lacerations
and, because it is much thinner than traditional forceps, it will
not exacerbate, and in many cases will offset, minimal
cephalo-pelvic disproportion (CPD) where the fetal head tightly
engages the birth canal. Because of the simplicity of the device,
the Company believes the average board certified obstetrician can
become proficient in its use within a nominal number of deliveries.
The device, including its application system, is disposable after
a single use.
Comprehensive clinical testing of SofCeps began at Baylor
College of Medicine, Houston, Texas, in October 1993. Under a
protocol approved by the Baylor Human Investigative Review
Board ("IRB"), assessments of successive prototypal configurations
were made using term fetal demise infants in order to evaluate the
components and function of the device. During the first year of
testing, it was determined SofCeps presented little, if any, risk
of maternal injury. Traction testing on several stillborns
demonstrated that force more than sufficient to promote fetal
descent in the birth canal resulted in no objective evidence of
fetal head feature trauma and permitted clinical conclusion that
the device was very likely to be less injurious to a fetus than
traditional devices.
On April 6, 1995 a developmental milestone occurred when a
term stillborn was successfully delivered with the device. During
this procedure, application over the fetal head was accomplished
and the Company concluded the device was clinically effective in
assisting completion of the delivery. Several modifications of the
delivery system have been made and with the completion of a minimal
number of still born deliveries, the results expected from the
Phase One testing protocol were considered by the Company to have
been met. Application for approval of Phase two protocol governing
live deliveries has begun. Deliveries were planned in the Phase
Two program for the fourth quarter of 1997 and the first quarter of
1998. An interruption of the research and development capital
needed to refine the clinical prototypes to a final commercial
design has delayed these clinical studies. Internationally,
clinical sites at the Perinatal Institute in Bern, Switzerland, the
Hospital Central in Mexico, and the Kenyaatla National Hospital in
Kenya were selected for consideration of live birth testing. This
testing has not commenced at present, but is anticipated to begin
first in Mexico and later in Switzerland and/or Kenya with the
acquisition of adequate research and development capital and
completion of final commercial design. In the United States, a
letter of intent was signed with physicians at the University of
Maryland to begin live birth testing when the final commercial
prototype is achieved.
MEDICAL SAFETY - CoverTip
Medical device safety is a large and growing issue within the
healthcare community. The transfer of infectious diseases result
in enormous economic and social costs. With AIDS, Hepatitis and
other communicable disease, the possibility of accidental infection
is a critical issue to healthcare workers and professionals. The
(CDC) Center for Disease Control in Atlanta reports that for every
250 syringe injections an accidental needle stick occurs to the
person administering the injection. The cost for subsequent
mandatory testing is between $250 and $1,020. While the incidence
of AIDS contracted through accidental needle sticks is low (less
than 100 cases reported in the U.S. to date) the impact to the
individuals tested and the cost of both the testing and treatment
is enormous.
The current syringe market approaches 2.5 billion dollars in
the U.S. alone. Currently, safety syringes comprise a relatively
small portion, less than 20% of the total market. The desire to
use a safety syringe has been impeded by both cost and technique
requirements of currently available safety syringes. Current safety
syringes are 3-4 times the cost of standard syringes. Safety
syringe devices currently in the market are difficult to use and
require hospital training and ongoing inservice. These products
do not cover the needle prior to removal from the skin and can pose
a danger upon extraction from the patient.
In contrast to other safety syringes, the CoverTip device s
unique design covers the tip of the needle while in the skin and
locks in place protecting the healthcare worker during the
injection process and during disposal of the used syringe. Use of
the CoverTip requires no additional instruction.
The Company believes that substantial capital barriers may
preclude direct entry of the safety products by Medisys in the U.S.
Therefore, the Company will likely seek a license arrangement with
a major medical company. Foreign markets may offer similar
opportunities and are being explored. The Company has received
inquiries concerning the CoverTip product from the three largest
suppliers of syringes in the United States as well as a health
product company, but has elected not to engage in active
negotiation of any licensing agreement until FDA clearance has been
obtained.
On March 23, 1998 the Company submitted additional elective
test data to the Food and Drug Administration ("FDA") to support
its effort to obtain a 510(K) Exemption from Pre-Market approval
for CoverTip from the FDA. These tests of over 500 syringe animal
injections were rated "excellent" by the investigators and achieved
all test goals. The Company believes that the CoverTip safety
device should qualify for 510(K) FDA approval based on the fact
that to the best of the Company s knowledge all other safety
syringes are so classified by the FDA. It is anticipated that
favorable approval by the FDA should occur in the second quarter of
1998. Additionally, the Company is developing other safety
products including SofDrawTM, fluid collection syringe; BxDrawTM,
fine needle biopsy devise; and MultiDrawTM, blood collection system.
Other Products
The Company is also presently developing other products termed
Other Opportunity Products which may generate revenue for the
company. A brief non-inclusive outline of opportunity products
available to the Company are as follows:
MEDISYS VETERINARY OBSTETRICAL TRACTOR
VetCeps is a veterinary application of the SofCeps
obstetrical tractor. The Company enjoys patent protection for
veterinary application in bovine (cattle), ovine (sheep), and
equine (horse) obstetrics within its original patents. Development
thus far has been limited in large measure to the bovine
application because of its substantial potential market and because
it appears to offer an obvious solution to problems which arise
with the use of commonly used steel veterinary obstetrical fetlock
chains. The device has been successfully used on both foreleg and
hindleg to deliver live and stillborn. This product is now being
sold commercially. The Company introduced the device generating
sales of approximately 100 units during 1996 to test market
VetCeps . Sales were discontinued in the first quarter of 1996
because the original product proved to be too large to accommodate
the fetlock (leg) of the majority of newborn calves. Subsequently
the product was redesigned and is now available in three different
sizes to more closely accommodate the majority of newborn calves.
The device was reintroduced to the veterinary market in February
1997 and achieved sales of approximately $100,000 in 1997.
DisKlip (Lifeline Management System)
DisKlip ("DisKlip ") is a group of devices used in connection
with the standard intravenous administering of medication ("I.V.")
and to secure other medical tubing. The DisKlip is a simple,
inexpensive, one piece, disposable after single use device which is
designed to prevent inadvertent or accidental tug trauma to an I.V.
site and to afford the medical provider with an easier and more
efficient means of attaching other medical tubing. The Company
believes that DisKlip will require little or no personnel training
and will result in savings in nursing time, reduction of instances
of site inflammation and irritation of vein walls (lumens),
reduction of instances of infiltration and veil wall puncture,
reduction of risk of sepsis, and reduction of patient discomfort.
The Company's expectations with regard to DisKlip have now been
verified by multi-hospital field testing. This field testing
consisted of actual patient use at several hospitals in Mexico and
in the united States as well as application and wear by various
Medisys personnel. It also included one market evaluation by
potential customers in the Unites States and Mexico. The adhesive
backing has been improved to incorporate a foam tape approach
that allows for skin breathability and reduced allergic reaction
(hypoallergenic). Additional designs are being constructed to
accommodate various locations of the body where medical tubing is
applied and the company is currently addressing that need through
additional research and development.
Backlog
The Company has no backlog of the VetCeps , veterinary birth
assistance device.
Market Analysis and Competition - SofCeps
The market for obstetrical products, both in the U.S. and
worldwide, is substantial. While declining birthrates are a factor
for consideration in western countries, even a slight decline
indicates a stable U.S. market of about 4 million births per year
for the next 10 years. Management believes that the rapidly
expanding population growth of third world and Pacific rim
countries represents a marketing opportunity for assisted delivery
devices and obstetrical products in general. The simple technology
that SofCeps employs will be of particular appeal in third world
countries and should offer strong market opportunities.
The primary assistance device in use today is stainless steel
obstetrical forceps. They were developed in the latter part of the
16th Century. Actual traction is exerted slightly below or
underneath the mandible and is point concentrated. Slippage of the
forceps is almost invited because of natural lubrication, refusal
of the fetal skull to conform to existing forceps design, and a
myriad of variables which exist from one fetal skull/pelvic
relationship to another. Virtually every forceps assisted delivery
involves risk of injury to the mother and the baby.
Stainless steel forceps apply a concentrated gripping force on
the fetal head which can result in a series of injuries from minor
forcep marks to skull fractures, central nervous system damage
and fetal death. The manipulation of the steel forceps in the
birth canal often causes maternal injuries ranging from spiral
lacerations of the pelvic floor to severe lacerations to the
cervix. In both instances, these injuries result in significantly
increased healthcare costs associated with post-delivery
complications and increased inpatient days.
Statistics have shown that forceps are used to assist up to
26% of vaginal deliveries. Injuries to the fetus range from minor
abrasions or "forceps marks" to skull fractures with massive brain
damage. The mother is at risk of lacerations of the cervix, which
can be life threatening, and the floor of the pelvis. Such
injuries are exhaustively dealt with in the medical literature and
the obstetrical community would welcome a device which promises a
significant reduction in maternal and fetal morbidity.
The only other significant attempt to introduce a new product
into this forceps arena has been the vacuum system. The vacuum
unit was patented in the late fifties and in spite of numerous
attempts toward refinement, management feels that the approach
still remains plagued with disadvantages. The system grips the
upper half of the fetal skull with a suction device and traction is
then applied. Use of the system frequently results in hematoma
over the fetal skull as well as rebound trauma caused by the device
popping off the fetal skull. Once in place, the device precludes
manual rotation of the skull. Rotation is frequently required to
ease passage through the pelvis. Many obstetricians have
experienced difficulties because they resort to twisting on the
extractor to accomplish rotation. This can result in serious
fetal injury. For these and other reasons, the vacuum system has
largely fallen into disfavor and the majority of obstetricians have
returned to the use of traditional forceps.
1. Customer Characteristics
Potential customers for the SofCeps product varies. They
include obstetricians, managed care organizations, hospitals and
patients (consumers).
a. Obstetricians
The need for safe, reliable birth assistance creates a base need
for replacement of current devices. Documentation of successful
deliveries, with reduction of risk to both mother and infant, will
be a strong motivator influencing the adoption of the SofCeps
device by the obstetrical community as well as hospitals (health
care providers), and physicians.
b. Hospitals (Health Care Providers)
Management believes that obstetrical care is being consolidated in
communities to establish a cost effective delivery system for this
service. Hospitals are increasingly under pressure to reduce
costs, while maintaining quality of care. SofCeps offers these
healthcare providers the opportunity to increase the quality of the
delivery process, while reducing the overall cost of care. An
additional opportunity is the economic potential for reduced
malpractice insurance and C-Section rates. As hospitals and health
care providers move toward captative care, the pressure to decrease
length of stay costs, while maintaining quality, will increase.
c. Patients (Consumers)
Patients are increasingly aware of the need to reduce health care
costs, but at the same time are concerned over the quality of care.
Forceps use and the concept of vacuum extractor assisted deliveries
are innately unpleasant to the average consumer. Therefore,
management believes that the SofCeps product, as well as other
simple Medisys products, represent viable alternatives to the
general consumer community, including Women's health and pediatric
advocacy groups.
2. Competitive Evaluation
The competitive product situation for obstetrics includes
products that are a part of diversified health care corporations
with slight focus on obstetrics. In the device arena, products for
obstetrics are produced from divisions of various companies whose
products are broadly based in many areas of health care. Equipment
companies such as Utah Medical and Hewlett Packard market
monitoring equipment and diagnostic tools for OB. Advertised as
the only company exclusively focused on women's health issues,
GynoPharma had a broad range of products primarily pharmaceutical
and over the counter drugs.
In the specific area of competition to SofCeps , instrument
manufacturers such as the Codman Division of Johnson & Johnson, V.
Muellar, and Weck manufacture obstetrical forceps in various forms.
Vacuum extractors are manufactured by Mityvac and others.
Instrument companies do not look at forceps as a major product
line, but can be expected to respond with alternative methods of
assisted delivery once the SofCeps product is introduced into the
market place. The same can be said for the vacuum extractor
companies.
3. Market Potential
As set forth herein, SofCeps is intended to be multi-
dimensional in use and is designed to be applied in a prophylactic
manner in all cases where mother and fetus do not present with
contraindications. Less than one half of section deliveries result
from maternal/fetal clinical presentation, i.e. inadequate pelvic
architecture, cephalo pelvic disproportion, vaso or placenta-
previa, etc., and one half of section deliveries are labor related
and perhaps preventable through use of a beneficial obstetrical
tractor.
The SofCeps device is a totally new concept which the Company
intends to market on a worldwide basis. The market is limited only
by the eventual degree of acceptance in the obstetrical community
and by the number of live births in each given market area. The
device is disposable after a single use, so potential market volume
repeats on an annual basis. The degree of market penetration will
depend upon product acceptance and effectiveness of marketing
efforts. The medical marketplace is receptive to new products
which can provide better patient care, savings in medical costs,
benefits to the health care industry, and which represent advances
in risk reduction. The Company is poised to effectively
demonstrate that the device will meet the criteria of today's
managed healthcare marketplace.
There are no past or present medical comparables to SofCeps
and pricing is based on costs of manufacture and distribution,
including usual administrative items, as well as preliminary price
sensitivity analysis. Medisys believes that a price of
approximately $300 per device will meet the requirements of the
managed care environment.
4. Non-Controllable Elements
With health care reform on a massive scale apparently
postponed for the foreseeable future, government intervention would
appear only to enhance the prospects for SofCeps as well as other
Medisys ' simple, easy to use, technologies. The managed care
companies should encourage the use of SofCeps , and economic
studies are planned in order to document the value.
The Company intends to participate in economic studies of
various products to demonstrate their positive cost outcome versus
standard care and other competitive methods of treatment. These
economic studies may be conducted from assessment of currently
available data and/or specific studies to demonstrate reduction in
overall cost through use of Medisys products. These studies are
anticipated to commence simultaneously to market introduction of
the various products and take varying amounts of time to complete
based on their complexity. While these studies are proof
statements to various benefits of Medisys products, they are not
anticipated to be critical to market introduction but rather
enhancements to each of the product s value to key decision makers.
The greatest elements outside immediate control would be the
introduction of similar birth assist products and the uncertainty
of the FDA approval process.
5. Marketing Plan
Medisys currently plans to market SofCeps on a direct basis
or through a co-marketing arrangement with supplemental sales
support from specialized sales representatives. This approach is
intended to achieve appropriate marketing activity while minimizing
selling expenses. Internationally, the Company plans to distribute
Medisys products worldwide through international market
development brokers.
The market for an effective delivery assistance device is
worldwide. Concurrent with development and refinement efforts,
Medisys will employ comprehensive measures designed to apprise the
obstetrical world of what is forthcoming. Management will endeavor
to have customers ready and waiting when the device enters mass
production. These efforts have begun with public relations and
preliminary market communications which are underway.
Selling strategy will take a multi-focused approach centered
around the following customer groups:
During the final development stage Obstetricians will be
communicated with via direct mail and convention exposure at
major OB meetings to introduce the concept idea of SofCeps .
In addition, after successful live birth clinical testing,
educational seminars will be conducted on the appropriate use
of the SofCeps device by targeting the thought leaders and
volume delivery obstetrical centers. Specific effort will be
made to establish SofCeps advocates in the top 20 markets
nationally. Major benefits that will be positioned to the
obstetrician will include an increase in patient care and
potential for reduced malpractice insurance.
Major obstetrical societies will be contacted and requests made
for endorsements of the SofCeps product vs. forceps use.
After product testing, the Company plans to commission a panel
of distinguished obstetricians as an advisory group to provide
broad input and endorsement support.
Obstetrical Nurses will be exposed to the product through
convention activity at major meetings, select targeted direct
mail to key association officers, and thought leaders within the
major metropolitan markets.
Providers/Hospitals - A direct selling strategy will be employed
to the top 200 obstetrical hospitals. In addition, group
purchasing organizations will be contacted for inclusion of the
SofCeps product into their "formulary." The major selling
appeal to providers is the potential to increase care quality
and the potential for reduction of C-Section rates and
malpractice occurrence.
While physician obstetricians will be the final users, the
device is considered a hospital supply item. Exclusively,
hospitals with obstetrical units will be the customers of the
Company.
Managed care organizations have established a list of procedures
which they feel are being excessively used within the health
care community. Included as one of the highest within this list
are C-Section rates. C-Sections currently cost about $4,570
more than normal deliveries and there are wide variations of
occurrence by institution and geography. Management believes
that the use of SofCeps should generate a net savings over C-
Section delivery.
The Company s selling strategy will include contacting major
women's and children's advocacy organizations. The development
of a press kit for use in local areas where SofCeps has been
adopted for use will provide an efficient tool for local media,
physicians, and hospitals thereby enhancing general media public
relations.
Insurers - If SofCeps proves clinically successful and produces
a relatively short track record of safe and injury free
deliveries, the Company believes that medical malpractice and
health insurers will support the transitioning of insured
obstetricians from the continued use of forceps. A single
instance of infant brain damage can cost an insurer in excess
of $40 million dollars. A demonstration that SofCeps will
reduce the number of such instances will ingratiate insurers and
compel their collective assistance.
Women s Groups - In addition, the Company intends to advertise
and solicit various consumer periodicals that target a
predominantly female readership. By using the family periodicals
as communication tools, the message of the benefits of a
SofCeps delivery will be widespread.
Education - From a services standpoint, the Company intends to
provide user training through seminars, literature, clinical
video programs, and clinical workshops. Emphasis will initially
be placed on working through teaching hospitals in the various
geographic markets. Planning is underway for a detailed and
intense education program. Plans are to conduct at least one
seminar per month at strategic geographical areas across the
United States.
6. Advertising and Promotions
Initial promotional and market education activity has begun,
particularly targeted to each of the major customer groups. This
initiative has consisted of periodical news releases and
publication in a limited number of business and professional
publications about the Company in general, and SofCeps as a birth
assistance alternative concept. Further advertising and public
relations will be targeted to each category. For example, even
though hospitals will be the purchasers, obstetrical physician
users will dictate whether the purchases are made which will
require a blanket effort to insure wide familiarity with the device
within the obstetrical community.
Medical literature, in this case the various obstetrical
journals, is a primary key in dissemination of new information to
individual obstetrical practitioners. Appropriate physician
authored informative articles will be provided to these journals
for publication and distribution to individual subscribers.
Results of human clinical trials are being reported with clinical
details of each delivery.
7. Product Warranties
The Company will attempt to develop reasonable warranties with
application of the SofCeps product and these will be contained in
the product package insert which will be included with every
SofCeps unit sold or distributed.
Market Analysis - CoverTip
Currently $2.5 billion of annual sales volume is generated
with the use of syringes in the United States with safety syringes
purchases during this annual period approximating $300 million of
this amount. The penetration rate of safety syringes is driven by
concern over the health of the doctors, nurses, and other
healthcare professionals as well as cost associated with their care
and the testing necessary in response to the occurrence of
accidental needle sticks. The rate of accidental needle stick
reported by the Center for Disease Control (CDC) was one occurrence
for every 250 injections made. While the number of confirmed
cases of AIDS contracted accidental dirty needle sticks remains
small (less than 100 individuals) the occurrence of hepatitis and
other infectious diseases compounds the problem and cumulatively
results in tremendous cost, liability, long-term care and
productivity losses. Requirements for reporting all accidental
dirty needle sticks result in subsequent testing cost for each
event from between $250 and $1,020.
Although there is support from the healthcare worker community
for safety syringes, there are still various obstacles such as
their higher cost, (3-5 times standard syringes) as well as the
difficult technique changes necessary to use many of these
currently cumbersome devices. The inservice cost to train a myriad
of healthcare practitioners using syringes places an added burden
on the conversion rate due to the awkward nature of currently
existing safety syringes. Many of these products require two-
handed application techniques which can, at times, present
accidental stick opportunities.
Customer characteristics
Customers for the CoverTip safety syringe include all
healthcare workers, nurses, physicians, hospitals, clinics, managed
care organizations as well as insurers.
a. Doctors, nurses, and healthcare providers.
The desire to reduce the likelihood of an accidental dirty
needle stick is strong with all healthcare workers. Individuals
who have contracted AIDS, hepatitis and other life threatening
contagious disease have become advocates for the adoption of safety
devices within the healthcare community. These individuals and
organizations supporting healthcare worker safety provide impetus
for the use of safety syringes.
b. Hospitals.
The need to reduce the cost of testing associated with
accidental needle sticks as well as reduction in liability and in
negative publicity and pressure from healthcare worker
organizations are strong motivators to the hospital in adopting a
relatively low cost easy to use safety syringe.
c. Managed Care/Insurance
Managed Care organizations and Insurers assume the burden of
liability both for treatment and damages associated with accidental
needle sticks. These groups appear supportive of efforts to reduce
the incidence of infectious disease contracted by cross
contamination.
Competitive Evaluation
Within the syringe business in the United States, Becton -
Dickenson enjoys the largest market share position approximating
60% of the market. Sherwood Medical a division of Tyco Industries
has approximately 30% with the remainder of the market divided
among numerous private label as well as foreign companies such as
Terumo. The safety syringe market is sub-divided in similar
fashion. Over 450 patents have been issued on various types of
safety needles and/or syringes. In spite of the proliferation of
interest and effort to convert these products, the difficulty in
changing behavior of the application technique of the healthcare
worker as well as the prohibitive cost (3-5 time standard syringes)
has inhibited the penetration of safety syringes into the overall
standard syringe marketplace. On March 28, 1998 the Company
submitted additional clinical testing to support its application
for 510(K) Exemption from Pre-Market approval for CoverTip to the
FDA.
Marketing Plan
Due to the large capital investment required to manufacture
multiple large quantities of the CoverTip product, the primary
strategy of the CoverTip selling campaign will be designed to
obtain a third party large company partner with the manufacturing
distribution resources and expertise needed to rapidly introduce a
product with this enormous opportunity.
The CoverTip safety syringe will address each of the major
issues associated with current safety syringes as well as provide
benefits over standard intramuscular (IM) syringes. While standard
syringes cost between $0.06 and $0.12 each, it is anticipated that
the CoverTip safety syringe will be priced at less than $0.20
each. Specific costs will be developed once full production plans
are implemented.
As the CoverTip safety syringe requires no change in
technique, and is currently identical in use to a standard syringe,
it will eliminate educational (inservice) requirements that
currently exist with many safety syringes on the market.
Additionally, because of the unique design of the CoverTip safety
syringe, the needle tip is actually protected prior to removal from
the patients skin. This greatly reduces any contaminated needle
exposure to the healthcare worker and offers an advantage to other
safety syringes that require extraction from the patient s skin
prior to implementation of various needle tip protection methods.
Patents and Trade Secrets
The Company has aggressively pursued obtaining patent rights
to those products which it anticipates marketing. The Company is
already the owner of twelve U.S. patents protecting the Company's
SofCeps , CoverTip , TetCeps, DisKlip , and Re-Ty devices. These
consists of U.S. Patent numbers 5122148, 5217467, 5318573,
5460611, 5496283, 5573539, 5593413, 5632750, 5681290,5687455 (two
device patents), and 5720727. The Company also owns one letters
patent protecting the SofCeps device (no. 669116) from Australia.
Eleven of the issued patents are being prosecuted internationally.
Three additional U.S. patent applications have resulted in notices
of allowability pursuant to which issue fees have been paid, and
the Company expects receipt of the final patents shortly. These
patents will cover the Company's SofDraw, Multi-Draw, and a third
design (Enscoping) of the Re-Ty line of fastener products and will
bring the total of issued U.S. Patents to fifteen. Additionally,
the Company has pending a mix of seven original and/or CIP
applications. The Company also has a backlog of viable proprietary
product concepts which meet company development criteria.
The Company has filed six U.S. trademark applications
preserving its right to use the trademarks "SofCeps ", "VetCeps ",
the "Medisys " logo, "DisKlip ", SofDerm , and "CoverTip " to
identify the various Company products. As the Company proceeds
forward with the commercialization of these and other products,
U.S. and foreign trademark applications will be filed to protect
their product name.
The Company intends to obtain copyright protection on its
product packaging, instruction sheets, and such other Company
materials that the Company believes significant to warrant
procurement of copyrights.
The Company has obtained through its research and development
efforts during the past five years, a large body of trade secrets
relating to the design and construction of SofCeps . In addition,
the Company has obtained substantial proprietary business
information relating to the manufacturing costs, marketing and
selling of the Company's various products.
Product Liability and Insurance
The Company may be exposed to potential product liability
claims by users of its products. The Company currently maintains
general business liability insurance limited to $1,000,000 coverage
per occurrence and in the aggregate. The Company's clinical
testing for human fetal demised deliveries has been through St.
Paul insurance Company with coverage limits of $5,000,000 per
occurrence and $15,000,000 aggregate coverage.
Additionally, the Company has obtained product liability
insurance for the VetCeps product from American Equity Insurance
Company. The coverage limit on this policy is $1,000,000 per
occurrence with a $1,000,000 general aggregate.
Government Regulation
The five primary product concepts of the Company are SofCeps
birth assistance device; CoverTip Safety Syringe; VetCeps animal
birth assistance device; DisKlip medical tubing fastener system;
and Re-Ty cable fastener. The SofCeps and CoverTip are subject
to market introduction regulation by the FDA. VetCeps , DisKlip ,
and Re-Ty are not subject to pre-market regulation by the FDA
Generally, all medical devices are subject to FDA regulation
under the Medical Device Amendments of the Federal Food, Drug and
Cosmetic Act and are classified into one of three categories, Class
I, Class II or Class III, depending on their intended use and upon
the degree of regulation necessary to provide reasonable assurance
of their safety and effectiveness. The class into which any
specific device is placed determines the requirements that must be
met before a manufacturer may distribute the device in interstate
commerce. Section 510(K) of the Medical Device Amendments provides
for a pre-market notification requirement whereby manufacturers
intending to market a new or significantly modified device are
required to submit a pre-market notification to the FDA in order to
establish substantial equivalence in terms of safety and
effectiveness to a device already on the market in the United
States prior to 1976, or to a device marketed after that date that
has been determined to be substantially equivalent. This
notification is required to be submitted at least 90 days prior to
introducing the device into interstate commerce, or otherwise
holding or offering the device for commercial distribution. No
prototype is required, however, additional data from testing may be
requested.
Within 90 days of receipt of the pre-market notification, the
Center for Devices and Radiological Health ( CDRH ) determines
whether the device is equivalent . If the device is deemed
equivalent, it cam be marketed. If the CDRH determines that a
device is not equivalent, the manufacturer may resubmit the 510(K)
notification with new data, file a reclassification petition, or
submit a pre-market approval application ( PMA ). A PMA is
required instead of the Section 510(K) process only if the device
is held to be a Class III device. Class III devices are those
represented to be life-sustaining or life-supporting, are implanted
in the body, or present potential unreasonable risk of illness or
injury. Class III devices are subject to more the rigorous FDA
approval process which generally required the completion of three
major steps. The first step involves the granting by the FDA of an
Investigational Device Exemption ( IDE ) which permits the proposed
product to be used in controlled human clinical trials. Upon
completion of a sufficient number of clinical cases to determine
the safety and effectiveness of the proposed device for specific
indication, a PMA is then prepared and submitted to the FDA for
review. This extensive submission includes design, manufacturing,
quality control and clinical data to substantiate the proposed
device s compliance with FDA manufacturing regulations as well as
to support its medical effectiveness. Upon acceptance by the FDA
of the PMA, the third major step, a public review if the data by an
advisory panel of the FDA, industry and medical professionals takes
place. Prior to receiving final approval, a company is inspected
by the FDA to verify that its manufacturing procedures meets all
requirements of the FDA regulations.
The Company believes that both of its primary products are
substantially equivalent to devices already marketed and are
therefore exempt from PMA.
However, the fact that the SofCeps device involves the
birthing of babies, the Company s approach has been and remains
determined to follow a protocol consistent with all FDA guidelines
and to complete all good manufacturing practices prior to marketing
the product.
A discussion of where the Company stands with regard to the
FDA process is included under each product heading.
Prior to the Phase I testing of SofCeps , the Company applied
to the FDA for a 510(K) exemption from Pre Market Approval (PMA)
for marketing the SofCeps device. PMA could require a lengthy
testing and approval process. The FDA has reviewed the Company's
application and testing protocol. Based on Phase I data, the
Company was allowed to continue its fetal demised clinical testing.
An Investigational Device Exemption (IDE) Draft for Phase II
testing has been submitted to the Office of Device Evaluation
(ODE/OB-GYN) for review and comment. The Company has established
a positive dialogue with the FDA and believes that the IDE process
will be postured to proceed with Phase II testing when Phase I is
successfully completed. The Company intends to resubmit a 510(K)
application to the FDA concurrent with the accumulation of live
human clinical test data.
The Company believes that the CoverTip safety device should
qualify for 510(K) FDA clearance. On March 28, 1998 the Company
submitted additional clinical test data to support its 510(K)
Exemption from Pre-Market approval previously filed with the FDA.
Other than the FDA, the Company does not believe that there
are any existing or probable governmental regulations that would
adversely affect the Company or its business.
All materials used in Medisys disposable products are standard
medical materials compatible with present methods of hospital
disposal in accordance with accepted practices and applicable laws.
Employees
As of March 31, 1998 the Company employed six full-time
individuals, consisting of three executive officers, one VetCeps
general manager and two office staff personnel. In addition to its
full-time employees, the Company uses the services of certain
consultants on a contract basis. These consultants include,
William D. Kiesel, a patent attorney and Director of the Company;
Carolyn Crochet, an accountant and bookkeeper; Joel Faden, an FDA
consultant; and KJS financial consultants. Mr. Kiesel is
reimbursed for patent costs and expenses only. Gary Schneberger is
a full-time engineering and development consultant who is
compensated on an hourly basis, plus expenses. Ms. Crochet is
compensated on an hourly basis. Mr. Faden is compensated on an
hourly basis as services are needed.
KJS Consulting was contracted with to consult in March 1998 as
a financial advisor and on investor relations matters. KJS was
initially retained for 17,500 shares of the Company common stock
(restricted) plus expenses.
Item 2. Properties
The Company leases office facilities consisting of
approximately 3,532 square feet located in Baton Rouge, Louisiana.
The lease calls for a monthly payment of $2,942 including utilities
and is an annual lease renewable in December of each year. The
office is primarily devoted to product development, new product
design, VetCeps assembly and marketing, and administrative
activities. Additionally, the Company leases 450 square feet of
office space in Far Hills, New Jersey at a cost of $1,200 per
month. The Company believes that all of its initial requirements
for manufacturing, packaging, and storage will be met by its
contract manufacturers.
To support the development efforts without assuming fixed
costs, the Company has contracted with Gary Schneberger to
coordinate engineering, design specification, prototype
manufacturing, cost projections and schedules and to contract with,
interface with and manage additional sub-contractors on an "as
needed" basis. This association will also aid the Company with the
FDA s 510(K) approvals as well as SofCeps prototype development
and testing.
Item 3. Legal Proceedings
The Company is not a party to any material pending legal
proceedings and no such action by, or to the best of its knowledge,
against the Company has been threatened.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company s
Securities Holders during the fourth quarter of the Company s
fiscal year ended December 31, 1997.
PART II
Item 5. Market for Registrant s Common Equity and Related
Stockholder Matters
No shares of the Company s Common Stock have been registered
with the Securities and Exchange Commission or any state securities
agency of authority. The Company s Common Stock has been traded in
the over-the-counter market and quotations are published on the
NASD Electronic Bulletin Board under the symbol SCEP , and in the
National Quotation Bureau, Inc. pink sheets under Medisys
Technologies, Inc.
The following table sets forth the range of high and low bid
prices of the Common Stock for each calendar quarterly period since
the first quarter of 1996 as reported by the National Quotation
Bureau, Inc. ( NQB ). Prices reported by the NQB represent prices
between dealers, do not include retail markups, markdowns or
commissions and do not represent actual transactions.
High Low
1996
First Quarter 4.18 1.50
Second Quarter 5.12 3.87
Third Quarter 4.25 3.00
Fourth Quarter 3.25 1.87
1997
First Quarter 2.44 1.12
Second Quarter 1.94 .87
Third Quarter 1.47 .56
Fourth Quarter 1.19 .44
As of December 31, 1997 there were approximately 453 holders
of record of the Company s Common Stock, which figure does not take
into account those shareholders whose certificates are held in the
name of broker-dealers. The Company estimates that in excess of
1,000 shareholders of the Company hold their shares in the name of
broker-dealers.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that
it will pay cash dividends or make distributions in the foreseeable
future. The Company currently intends to retain and invest future
earnings to finance its operations.
Recent Sales of Unregistered Securities
A description of recent sales of unregistered securities can
be found in the Consolidated Statements of Stockholders Equity and
Note 7 and Note 8 to the Consolidated Financial Statements which
can be found elsewhere within this Form 10-KSB.
Item 6. Management s Discussion and Analysis of Financial
Condition and Results of Operations
The following information should be read in conjunction with
the Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Form 10-KSB.
Results of Operations
The net loss for the year ended December 31, 1997 increased
40% to $2,092,689 when compared to the corresponding 1996 period.
These results continue to be primarily attributed to the costs
associated with the Company s increased effort to develop its
products.
Operating expenses for the year ended December 31, 1997
("1997") increased 28% when compared to the corresponding 1996
period, primarily attributed to increases for 1997 in the following
items: cost of product sold (from $1,267 in 1996 to $29,797 in
1997) related to the marketing of the Company's initial product;
product research and development (32% increase) reflecting the
Company's continuing development of new and existing products;
professional services (74% increase) due to payments made in the
Company's stock for services rendered; and general and
administrative expenses (7% increase) due to normal increases in
general business expenses. This increase was partially offset by
the 7% decrease in salaries due to a reduction of staff. Because
available funding decreased in 1997, the Company used both cash and
its common stock to pay for its ongoing research and development.
Available development funds were focused and allocated primarily to
VetCeps , CoverTip , and other safety products, DisKlip and
Re-Ty .
Prior to 1997, work on products under development was
performed in-house, with the exception of prototype work performed
by TechniMark, Inc. in Clearwater, Florida.
Liquidity and Capital Resources
Historically, the Company s working capital needs have been
satisfied through its financing activities including private loans
and raising capital through the sale of securities. Working
capital as of December 31, 1997 was a negative $780,243 as compared
to working capital of $198,112 as of December 31, 1996. The
decrease in working capital from 1996 to 1997 is primarily
attributable to a decrease in the Company s cash balance of
$667,426 due to minimal financing activities by the Company in
1997.
The Company raised over $400,000 in cash and cash commitments
in 1997 though a convertible debenture. This debenture was
subscribed to by the Company's officers and directors and five
other investors. The proceeds from the debenture plus VetCeps
revenue has provided the capital to continue the Company's
operations.
Net cash used by operations for the year ended December 31,
1997 decreased to $876,853 compared to net cash used of $1,223,232
for the comparable 1996 period. This decrease is attributed to the
issuance of common stock for services rendered and increase in
deferred expenses, partially offset by the increased loss in 1997.
Net cash from financing activities for the year ended December 31,
1997 was $310,945 compared to $1,927,560 for the comparable 1996
period, primarily due to the decreased sale of common stock
in 1997.
The Company is currently technically in default on three notes
payable to various individuals totaling $34,500. One of the three
notes calls for monthly payments of $500 which the Company
continues to pay. Neither of the other two note holders have
demanded repayment and the Company continues to accrue interest on
all outstanding notes payable.
As of December 31, 1997 the Company had total assets of
$497,884 and stockholders deficit of $591,046. In comparison, as
of December 31, 1996 the Company had total assets of $1,051,500 and
total stockholders equity of $558,106. The 53% decrease in total
assets for the year ended December 31, 1997 is primarily due to
reduction of cash realized from the Company s financing activities.
Management believes that the Company has sufficient capital
resources and commitments to fund anticipated operations until some
time in the second quarter of 1998. Management estimates that its
current level of operations require approximately $50,000 per month
in cash based upon average monthly cash flows during the fourth
quarter of 1997. Unless the Company is able to substantially
increase current sales of its products during early 1998 or is able
to raise additional sales of corporate debt or equity securities,
the Company may encounter a cash flow shortage during the third
quarter of 1997. The Company intends to seek additional equity or
debt capital through private sources and/or a public offering,
although there can be no assurance that the Company could
successfully complete any such offering. As of the date hereof,
the Company has not entered into any firm agreements or
understandings for the raising of capital from public or private
sources. If sales revenue from the Company s products under
development are not adequate to fund the Company s future
operations and it is unable to secure financing from the sales of
its securities or from private lenders, the Company could
experience additional losses which could curtail the Company s
operations. The continuation as a going concern is directly
dependent upon the success of its future operations and ability to
obtain additional financing.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company wishes to advise readers that
actual results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including,
but not limited to, the following: the ability of the Company to
secure additional financing, the development of the Company's
existing and new products, the potential market for the Company's
products, competitive factors, and other risks detailed in the
Company's periodic report filings with the Securities and Exchange
Commission.
Item 7. Financial Statements and Supplementary Data
The Company s Consolidated Balance Sheet as of December 31,
1997 and the related Consolidated Statements of Operations,
Stockholders Equity, and Cash Flows for the years ended December
31, 1997, and 1996, and from inception on January 21, 1991 through
December 31, 1997 have all been examined to the extent indicated in
their report by Jones, Jensen & Company, independent Certified
Public Accountants, and have been prepared in accordance with
generally accepted accounting principals and pursuant to Regulation
S-B as promulgated by the Securities and Exchange Commission. The
aforementioned financial statements are included herein in response
to Item 7 of this Form 10-KSB.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Medisys Technologies, Inc. and Subsidiary
(Development Stage Companies)
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of Medisys
Technologies, Inc. and Subsidiary (development stage companies) as of
December 31, 1997, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years ended
December 31, 1997, and 1996 and from inception on January 21, 1991
through December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Medisys Technologies, Inc. and Subsidiary (development stage companies)
as of December 31, 1997, and the results of their operations and their
cash flows for the years ended December 31, 1997, and 1996 and from
inception on January 21, 1991 through December 31, 1997 in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 9 to the consolidated financial statements, the Company has
incurred significant losses since inception relating to its research and
development efforts and has had no significant operating revenues, all
of which raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are
also described in Note 9. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
April 9, 1998
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Balance Sheet
ASSETS
December 31,
1997
CURRENT ASSETS
Cash $ 2,178
Accounts receivable, net (Note 1) 11,005
Inventory (Note 1) 21,004
Prepaid expenses 21,500
Total Current Assets 55,687
FIXED ASSETS
Leasehold improvements 2,195
Furniture and equipment 76,946
Leased equipment 10,010
Accumulated depreciation (51,050)
Total Fixed Assets 38,101
OTHER ASSETS
Deferred offering costs 2,250
Security deposits 4,000
Patent and trademark costs, net (Note 1) 397,535
Organizational costs (Note 1) 311
Total Other Assets 404,096
TOTAL ASSETS $ 497,884
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
1997
CURRENT LIABILITIES
Accounts payable $ 391,257
Accrued expenses (Note 3) 361,092
Payable-stockholders (Note 2) 49,081
Notes payable (Note 4) 34,500
Total Current Liabilities 835,930
LONG-TERM DEBT
Notes payable - less current portion (Note 2) 253,000
Total Long-Term Debt 253,000
TOTAL LIABILITIES 1,088,930
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 6 and 7)
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
13,120,810 shares issued and outstanding 6,560
Additional paid-in capital 6,373,102
Stock subscriptions receivable (Note 6) (175,000)
Deficit accumulated during the development stage(6,795,708)
Total Stockholders' Equity (Deficit) (591,046)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $497,884
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Operations
From
Inception on
January 21,
For the Years Ended 1991 through
December 31, December 31,
1997 1996 1997
REVENUES $ 97,634 $ 2,182 $ 102,618
OPERATING EXPENSES
Cost of product sold 29,797 1,267 31,638
Product research and development 654,629 496,446 2,339,217
Professional services 474,263 272,161 1,222,733
Salaries 271,720 290,857 1,310,626
Depreciation and amortization 27,898 25,548 129,372
General and administrative 371,094 348,186 1,372,939
Total Operating Expenses 1,829,401 1,434,465 6,406,525
OPERATING LOSS (1,731,767) (1,432,283) (6,303,907)
OTHER INCOME (EXPENSES)
Gain on sale of asset 13,042 - 13,042
Interest income 5,851 13,194 19,045
Interest expense (379,142) (26,566) (469,788)
Bad debt expense (673) (53,070) (54,100)
Total Other Income (Expenses) (360,922) (66,442) (491,801)
LOSS BEFORE INCOME TAXES (2,092,689) (1,498,725) (6,795,708)
INCOME TAXES - - -
NET LOSS $(2,092,689) $(1,498,725) $(6,795,708)
NET LOSS PER SHARE OF COMMON STOCK$ (0.17) $ (0.13)
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, January 21, 1991 - $ - $ - $ -
Common stock issued for cash
during 1991 at $.0001 per share 8,100,000 4,050 (3,060) -
Net loss for the year ended
December 31, 1991 - - - (8,667)
Balance, December 31, 1991 8,100,000 4,050 (3,060) (8,667)
Effect of reverse acquisition 1,768,500 884 (41,557) -
Private placement of common
stock for cash at $2.00 per share 250,000 125 499,875 -
Cancelled shares (418,500) (209) 209 -
Net loss for the year ended
December 31, 1992 - - - (269,551)
Balance, December 31, 1992 9,700,000 4,850 455,467 (278,218)
Issuance of common stock for
cash at an average price of
$2.21 per share 45,248 23 99,977 -
Common stock offering costs - - (4,970) -
Net loss for the year ended
December 31, 1993 - - - (802,338)
Balance, December 31, 1993 9,745,248 $ 4,873 $ 550,474 $(1,080,556)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1993 9,745,248 $ 4,873 $ 550,474 $(1,080,556)
Issuance of common stock for
cash at an average price
of $1.26 per share 60,016 30 75,581 -
Contributed capital by shareholders - - 513,812 -
Commons stock issued in settlement
of shareholder loans at
approximately $2.16 per share 200,000 100 431,495 -
Forgiveness of wages and fees
by shareholders - - 215,565 -
Common stock offering costs - - (97,791) -
Net loss for the year ended
December 31, 1994 - - - (960,966)
Balance, December 31, 1994 10,005,264 5,003 1,689,136 (2,041,522)
Issuance of common stock for cash
at an average price of $1.05
per share 627,937 314 659,562 -
Issuance of common stock for
services rendered at an average
price of $1.26 per share 121,939 61 153,789 -
Issuance of common stock for
prepaid rent at $0.35 per share 42,000 21 14,952 -
Sale of common stock options - - 431,800 -
Transfer of common stock in
settlement of debt - - 111,699 -
Net loss for the year ended
December 31, 1995 - - - (1,162,772)
Balance, December 31, 1995 10,797,140 $ 5,399 $3,060,938 $(3,204,294)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1995 10,797,140 $ 5,399 $3,060,938 $(3,204,294)
Issuance of common stock for
cash at a price of $1.50 per share 1,342,331 670 2,012,830 -
Common stock offering costs - - (85,420) -
Issuance of common stock for
consulting and professional
services rendered at an average
price of $3.39 per share 36,769 17 124,687 -
Issuance of common stock from
exercise of common stock
warrants at $1.50 and $1.25
per share 41,700 21 52,529 -
Issuance of common stock in
satisfaction of note payable
at $2.80 per share 20,000 10 55,990 -
Issuance of common stock for
warrants exercised at $1.75 per
share for subscription receivable 100,000 50 174,950 -
Common stock warrants issued for
extension of payable payment - - 33,454 -
Net loss for the year ended
December 31, 1996 - - - (1,498,725)
Balance, December 31, 1996 12,337,940 $ 6,167 $5,429,958$(4,703,019)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1996 12,337,940 $ 6,167 $5,429,958 $(4,703,019)
Issuance of common stock for
cash at an average price of
$1.27 per share 130,000 65 164,935 -
Common stock offering costs - - (85,420) -
Issuance of common stock in
satisfaction of note payable
at $0.78 per share 8,572 4 6,718 -
Issuance of common stock for
consulting and professional
services rendered at an
average price of $1.33 per
share 644,298 324 856,911 -
Net loss for the year ended
December 31, 1997 - - - (2,092,689)
Balance, December 31, 1997 13,120,810 $ 6,560 $6,373,102 $(6,795,708)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Cash Flows
From
Inception on
January 21,
For the Years Ended 1991 Through
December 31, December 31,
1997 1996 1997
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss from operations $(2,092,689) $(1,498,725) $(6,795,708)
Adjustments to reconcile net
income to net cash provided (used)
by operating activities:
Operating expenses paid by
issuance of common stock 857,235 124,704 1,165,806
Common stock options and
warrants for services - 33,454 211,254
Depreciation and amortization 27,898 25,548 129,372
Allowance for doubtful accounts 648 53,070 53,718
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
receivable (11,653) 870 (11,653)
(Increase) decrease in inventory (12,433) (4,145) (21,004)
(Increase) decrease in prepaid
expenses (14,503) 7,976 (21,500)
(Increase) decrease in other assets (2,250) - (2,250)
(Increase) decrease in loans
receivable - stockholders - 5,007 -
(Increase) decrease in security deposits - (859) (4,000)
(Increase) decrease in organizational
costs - - (311)
Increase (decrease) in accounts
payable 115,243 137,033 391,257
Increase (decrease) in accrued
expenses 255,651 (107,165) 361,092
Net Cash (Used) by Operating
Activities (876,853) (1,223,232) (4,543,927)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in patent costs (101,831) (91,053) (398,929)
Acquisition of subsidiary - - (40,673)
Purchase of fixed assets (10,853) (25,820) (94,700)
Disposal of fixed assets 11,166 - 11,166
Net Cash (Used) by Investing
Activities $ (101,518) $(116,873) $ (523,136)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Cash Flows (Continued)
From
Inception on
January 21,
For the Years Ended 1991 Through
December 31, December 31,
1997 1996 1997
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of stock offering costs $ (85,420) $ (60,100) $ (175,809)
Proceeds from capital lease - - 10,010
Payments on capital lease - (1,444) (10,010)
Payments on contracts payable (20,577) (13,132) (62,400)
Borrowings from stockholders 3,100 42,782 493,570
Borrowings from notes payable - - 338,500
Payment on loans payable - stockholders - - (20,984)
Payment on notes payable (4,158) (106,596) (141,277)
Stock subscriptions receivable - - (53,427)
Issuance of common stock 165,000 2,013,500 4,131,518
Proceeds from sale of stock options 253,000 - 507,000
Proceeds from exercise of common stock
options - 52,550 52,550
Net Cash Provided by Financing
Activities 310,945 1,927,560 5,069,241
NET INCREASE (DECREASE) CASH AND
CASH EQUIVALENTS (667,426) 587,455 2,178
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 669,604 82,149 -
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,178 $ 669,604 $ 2,178
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ -
Interest $ 13,718 $ 9,932 $ 56,898
NON CASH FINANCING ACTIVITIES
Purchase of automobiles on contract $ - $ - $ 62,400
Conversion of stockholder loans to
equity $ - $ 56,000 $ 599,294
Stock issued in payment of operating
expenses $857,235 $ 124,704 $1,165,806
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
a. Business Organization
The Company was incorporated on March 17, 1983 under the laws
of the State of Utah. The Company subsequently ceased its
original business activity in 1985 and thereafter primarily
investigated and sought new business opportunities and was
reclassified as a development stage Company as of March 1, 1989.
The Company has a wholly owned subsidiary (the Subsidiary)
which was incorporated in the State of Louisiana, on January 21,
1991, for the purpose of developing a device for the assistance
of childbirth under a patent which was applied for in May 1990
and granted on June 15, 1992.
The Subsidiary has been classified as a development stage
company since all activities to date have been related to the
development of a childbirth assistance device as well as other
medical devices.
On August 6, 1992 the Company acquired all of the outstanding
common stock of Medisys Technologies, Inc. (Medisys). For
accounting purposes the acquisition has been treated as a
recapitalization of Medisys with Medisys as the acquirer.
b. Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation on equipment and furniture is provided using the
straight-line method over an expected useful life of five years.
c. Patent and Trademark Costs
The capitalized costs of obtaining patents consists of legal
fees and associated filing costs. These patent costs will be
amortized over the shorter of their legal or useful lives. The
Company has numerous patents in various stages of development
and the application process. Several patents have been granted
but are being developed further in a continuation-in-part (CIP)
status until the development of a commercial product is
complete, the related product has received FDA (Food and Drug
Administration) approval and is in a marketable condition ready
for sale. Once patents have been granted, FDA approval
obtained, and sales commenced, no further costs associated with
the patent are capitalized. As of December 31, 1997, the
Company did have one patented product for which sales have
commenced with the related costs being amortized over the
estimated useful life of the patent. Management has determined
that estimated future cash flows from this product will be
sufficient to recover the capitalized basis of the costs
associated with that patent. The other patents for which costs
have been capitalized are considered to have continued viability
according to management of the Company with no significant
events occurring which would impair the value of the capitalized
costs associated with the individual patents.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
c. Patent and Trademark Costs (Continued)
The Company has also incurred costs associated with obtaining
trademarks related to the Company's existing and future
products. Those costs have been capitalized and will be
amortized over the estimated useful life of the trademarks once
approval has been received and usage begins. These trademarks
are considered to have continued viability according to
management with no significant events occurring which would
impair the value of the capitalized costs associated with the
trademarks.
d. Organization Costs
The Company's organization costs will be amortized over a 60
month period using the straight-line method when it begins its
principal activities.
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less, from the date of purchase, to be cash
equivalents.
f. Income Taxes
No provision for federal income taxes has been made at December
31, 1997 and 1996 due to accumulated operating losses. The
minimum state franchise tax has been accrued.
The Company has accumulated approximately $6,783,632 of net
operating losses as of December 31, 1997, which may be used to
reduce taxable income and income taxes in future years. The use
of these losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration
of the net operating loss carryforwards. The carryforwards
expire as follows:
Year of Net Operating
Expiration Loss
2006 $ 8,667
2007 267,504
2008 800,372
2009 959,825
2010 1,159,850
2011 1,496,725
2012 2,090,689
$6,783,632
In the event of certain changes in control of the Company, there
will be an annual limitation on the amount of net operating loss
carryforwards which can be used. The potential tax benefits of
the net operating loss carryforwards have been offset by a
valuation allowance of the same amount.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
g. Principles of Consolidation
The consolidated financial statements include the accounts of
Medisys Technologies, Inc., (parent) and Medisys Technologies,
Inc. (Subsidiary) a wholly owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
h. Presentation of Consolidated Financial Statements
Certain balances for the prior period have been reclassified to
conform to the current year presentation.
i. Inventory
Inventory is medical products held for sale which are carried
at the lower of cost or market value using the first-in first-
out method.
j. Net Loss Per Share
Net loss per share is computed using the weighted average number
of common shares outstanding during each period. Pursuant to
the requirements of Securities and Exchange Commission Staff
Accounting Bulletin No. 83, common shares issued by the Company
during the twelve months immediately preceding the initial
public offering at a price below the initial public offering
price have been included in the calculation of the shares used
in computing net loss per share as if they were outstanding for
all periods presented. There are no common stock equivalents.
k. Forward Stock Split
On July 20, 1992 the subsidiary forward split its shares of
common stock on a 8,100 shares for 1 share basis. All
references to shares outstanding and earnings per share have
been restated on a retroactive basis.
l. Credit Risks
The Company maintains its cash accounts primarily in one bank
in Louisiana. The Federal Deposit Insurance Corporation insures
accounts to $100,000. The Company's accounts occasionally
exceed the insured amount.
m. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
n. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful
accounts of $648.
NOTE 2 - PAYABLE - STOCKHOLDERS
From time to time the Company receives advances from certain
stockholders for the purpose of providing funds for the
Company's operating expenditures. The Company has also advanced
funds to stockholders. The outstanding balances of these
advances fluctuates during the year and do not have specific
repayment terms although the advances are generally considered
to be due or payable on demand. Accordingly, the related
receivable or payable has been reflected as current in the
accompanying consolidated financial statements. At December 31,
1997, there was a balance outstanding payable to stockholders
totaling $49,081
The Company also has notes payable to various shareholders in
the aggregate of $253,000. The notes bear interest at 10% per
annum, are unsecured and are due in 1999.
NOTE 3 - ACCRUED EXPENSES
Accrued expenses at December 31, 1997 consist of the following:
Payroll taxes payable $ 673
Accrued salaries and directors fees 307,627
Accrued interest payable 9,101
Contract labor payable 2,873
Finance charge 11,615
Accrued expenses - other 29,203
$ 361,092
The accrued salaries and directors fees are to be paid over the
next 24 months or when the Company is adequately financed.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 4 - NOTES PAYABLE
Notes payable consisted of the following: December 31,
1997
Note payable to Richard L. Apel, unsecured, dated
November 2, 1993 at 8%; principal and interest
delinquent since August 18, 1994. $ 12,500
Note payable to Cynthia F. Vatz, unsecured, dated October
19, 1993 at 8%; principal and interest delinquent since
August 18, 1994. 12,500
Note payable to Abraham B. and Edele Eckstein, unsecured,
dated March 1, 1995 which replaces an October 6, 1993 note
at 8%; monthly payments of $500 commencing March 1, 1995
with a single balloon payment for the remaining balance plus
interest delinquent since March 1, 1996. 9,500
Total 34,500
Less current portion (34,500)
Total Long-Term Portion $ -
These notes payable are in default. None of the related note
holders have demanded repayment and the Company is in the
process of negotiating repayment terms. The Company continues
to pay the $500 monthly installments on the one note payable to
Mr. and Mrs. Eckstein and continues to accrue interest on these
and all outstanding notes payable. 8,572 shares of common stock
were issued in partial payment of this note in 1997.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
During 1996, the Company adopted a Simplified Employee Pension
(SEP) Plan. The Plan enables the Company to make an annual
discretionary contribution to be allocated to employees on a
prorata basis according to their compensation for the year. In
addition, employees have the option to make voluntary Retirement
Savings Contributions in amounts not to exceed 15% of their
annual compensation. The Company elected to not make a
contribution for the year ended December 31, 1997. The Company
has no other bonus, profit sharing or deferred compensation
plans for the benefit of its employees, officers or directors
except if discussed elsewhere.
On January 21, 1993, the Company entered into three-year
employment agreements with each of Edward P. Sutherland, Gary
Alexander, and Jerry Phipps. These contracts expired on January
21, 1996 and were not renewed. The Company entered into
employment agreements with Edward P. Sutherland and Kerry Frey
on September 3, 1996 and September 4, 1996, respectively,
pursuant to which they will receive annual salaries of $150,000
and $144,000, respectively. These employment agreements expired
on December 31, 1997.
Any additional compensation to these employees is to be in the
form of an annual cash bonus or the granting of stock options
at the discretion of the Board of Directors not to exceed 50%
of their annual compensation.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
On March 29, 1995 the Company entered into a contract with a
medical institution to perform a clinical study of the Company's
SofCepts product. The contract required that payments totaling
$247,262 be made by the Company to the medical institution for
testing services. During 1995, the contract was amended with
additional payments to be made based on services to be
performed. The contract was later terminated before its
completion. The Company had made payments of $265,465 for
services performed pursuant to the contract. The medical
institution has claimed an unpaid balance of $133,326 which the
Company disputes. The Company contends that the services
stipulated by the terms of the contract were not performed by
the medical institution and that no additional amounts are due
and payable related to this contract. No amount has been
accrued in the accompanying consolidated financial statements
related to this transaction. The Company intends to vigorously
contend any further claims with respect to this contract and
believes that the probability that the Company will be required
to make additional payments is remote.
On January 1, 1994, the Company entered into an agreement to
lease 3,532 square feet of office space. The lease has a term
of two years with an extension option for an additional two
years through December 31, 1997. The Company exercised the
option to lease the office facilities for 1997 at a cost of
$2,942 per month, including utilities, for a total annual cost
of $35,304.
On October 1, 1996, the Company entered into an agreement to
lease 450 square feet of office space in Far Hills, New Jersey
at a cost of $1,000 per month, including utilities, for an
annual cost of $12,000. The New Jersey lease expired on July
31, 1997.
NOTE 6 - COMMON STOCK
During the months of October and November 1993, the Company had
a private placement of restricted common stock. 45,248 shares
were issued, the proceeds of which totalled $100,000.
60,016 shares of common stock were issued during 1994 with
proceeds of $75,611 through a private placement.
In April 1994, the Company retired the stock of an officer and
reissued the shares in a private placement, with the total
proceeds of $513,812 being contributed to additional paid-in
capital.
During August 1994, 200,000 shares of common stock were issued
for cancellation of shareholder loans totalling $431,595.
During 1994, officers and directors of the Company determined
that the accrued salaries and fees owed them totaling $215,565,
would be forgiven and were converted to additional paid-in
capital.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 6 - COMMON STOCK (Continued)
During 1995, 627,937 shares of common stock were issued through
various private placements with cash proceeds of $659,876.
During April 1995, 100,000 shares of common stock, valued at
$120,000, were issued to an officer of the Company for services
rendered. An additional 21,939 shares were issued to other
individuals in payment of services rendered valued at $33,850.
The Company also issued 42,000 shares of common stock for
payment of rent valued at $14,973 for 1995.
During December 1995, the Company transferred 120,000 shares of
common stock in settlement of a note payable with a balance of
$100,000 plus accrued interest of $11,699. These shares had
been issued previously in the name of the Company as collateral
on notes payable.
The Company conducted a private placement of its common stock
during 1996. 1,342,331 shares of restricted common stock were
sold at $1.50 per share resulting in total cash proceeds of
$2,013,500. 1,192,331 of the shares sold carry with them a
warrant to purchase one additional share of common stock at
$1.50 per share (see Note 7). $85,420 of costs were incurred
in connection with this offering and have been deducted from
additional paid-in capital in the accompanying consolidated
financial statements.
Between May and December, 1996, the Company issued an additional
36,769 shares of restricted common stock to officers, directors,
consultants, professionals and vendors for services rendered.
The shares were priced at the fair market value of the common
stock on the date the shares were issued and have been valued
at a total of $124,704 in the accompanying consolidated
financial statements for an average per share price of $3.39.
During 1996, warrants representing 40,000 and 1,700 shares of
common stock were exercised at prices of $1.25 and $1.50 per
share, respectively, generating cash proceeds to the Company
totaling $52,550. See Note 7 regarding common stock warrants.
In July 1996, 20,000 shares of restricted common stock were
issued by the Company as payment of a $50,000 note payable along
with accrued interest of $6,000 resulting in a per share price
of $2.80.
During 1996, the Company also issued 100,000 shares of
restricted common stock upon the exercise of common stock
warrants representing the same number of shares, having an
exercise price of $1.75 per share. Payment for the common stock
was made with a non-interest bearing four year promissory note.
The related shares are being held by the Company as collateral
for the promissory note. The shares have ben reflected as
issued and outstanding with a corresponding $175,000 stock
subscription receivable reflected as a reduction of
stockholders' equity.
During 1997, the Company issued 10,000 shares of its common
stock and 120,000 shares for cash at $1.50 and $1.25 per share,
respectively. The Company issued 8,572 shares of its common
stock in partial settlement of a note payable and accrued
interest of $6,722. The Company issued a total of 644,298
shares of its common stock for services. The services were
valued at the trading price of the shares when they were issued.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 7 - COMMON STOCK WARRANTS
As of December 31, 1997, the Company had outstanding warrants
for the issuance of common stock as follows:
Number of Date Expiration Exercise Estimated
Shares Issued Date Price Proceeds
557,000 1994 1998 $ 1.5625 $ 870,313
591,000 1995 1998-2005 $1.125 - $2.625 1,124,250
2,711,584 1996 1999-2001 $ 1.00 - $4.25 7,009,476
739,821 1997 1999-2002 $ 1.00 - $1.875 1,063,493
$10,067,532
762,000 common stock warrants were issued to current and former
officers, directors and affiliates of the Company for incurring
personal liability for the Company's indebtedness. The exercise
price of these warrants was equal to the fair market value of
the underlying common stock.
Of the outstanding common stock warrants, 212,500 were issued to
holders of the Company's notes payable as collateral and also in
return for the extension of repayment terms. In November 1995,
300,000 common stock warrants were issued to the Company's
patent attorney for deferring payment of legal fees. The
exercise price of all of these warrants was equal to the fair
market value of the underlying common stock on the date the
common stock warrants were granted.
261,000 common stock warrants have been issued in return for
directors of the Company forfeiting their claim to director fees
from prior periods. In addition, officers, directors and
affiliates have been issued a total of 1,172,597 common stock
warrants in exchange for common stock which they surrendered and
were issued to an unrelated entity for their assistance in
raising equity capital for the Company. In both cases, the
exercise price of the warrants was equal to the fair market
value of the related common stock on the date the common stock
warrants were granted.
During the period August through December 1997, the Company
issued a total of 23,102 common stock warrants having exercise
prices between $1.00 and $3.50 per share at a time when the fair
market price of the underlying common stock was $2.75 to $3.50
per share. The aggregate difference between the exercise price
and fair market value of the common stock totaling $33,454 has
been reflected as professional services with a corresponding
charge to additional paid-in-capital.
All common stock warrants issued in 1997 had exercise prices at
or above the trading price of the shares.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 7 - COMMON STOCK WARRANTS(Continued)
During 1996, the Company conducted a private placement of its
common stock (see Note 7), wherein the purchaser of one share of
the Company's common stock also received a warrant to purchase
one additional share of common stock at $1.50 per share. The
Company issued 1,192,331 common stock warrants pursuant to this
private placement, 1,700 of which were exercised prior to
December 31, 1996 (See Note 7). Any difference between the
exercise price of the common stock warrants and the fair value
of the Company's common stock on the date the shares of common
stock were purchased has been included in the proceeds from the
sale of the common stock as part of additional paid-in capital.
NOTE 8 - COMMON STOCK OPTIONS
On September 15, 1995, the Company issued options for the
purchase of 508,000 shares of common stock to certain
shareholders, one of which is also an officer and director of
the Company. The Company received $254,000 of consideration for
the issuance of these options or $0.50 per share which enabled
the holders to acquire the 508,000 shares of common stock for
additional consideration totaling $76,000, or $0.15 per share.
The fair market value of the Company's common stock on the date
the options were purchased was $1.00 per share. The difference
between the option exercise price and the fair market value of
the Company's common stock relative to these options totaled
$177,800 or $0.35 per share and has been included as
compensation in the accompanying consolidated statement of
operations for the year ended December 31, 1995. The options
expired unexercised on December 15, 1995. Accordingly, the
proceeds from the sale of these options and the difference
between the option exercise and fair market value of the common
stock has been reflected as additional paid-in capital in the
accompanying consolidated financial statements with no shares of
common stock issued.
NOTE 9 - GOING CONCERN
The Company's consolidated financial statements have been
prepared using generally accepted accounting principles
applicable to a going concern which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. The Company has incurred significant losses since
inception, relating to its research and development efforts and
has had no significant operating revenues. In prior periods,
the Company has had substantial working capital and
stockholders' equity deficits. In 1996, the Company was able to
raise working capital through the private placement of its
common stock. However, cash flow projections show that the
Company's reserves are not adequate to cover its needs for 1997.
It is unlikely that the Company can complete its research and
development projects without additional funds. Management of
the Company plans to raise additional capital through a private
placement or a public offering of its common stock and the
Company anticipates generating additional revenue from increased
product sales.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no changes in or disagreements with
accountants.
PART III
Item 9. Directors and Executive Officers of the Registrant
The Executive Officers and Directors of the Company are as
follows:
Name Age Position
Edward P. Sutherland 51 Chairman, Chief Executive
Officer and Director
Kerry M. Frey 52 President, Chief Operating
Officer and Director
Gary E. Alexander 53 Vice President, Chief Technology
Officer and Director
William D. Kiesel 53 Corporate Secretary and Director
Dr. Timothy Andrus 48 Director
Jane Cooper 43 Director
Dr. Robert L. diBenedetto 70 Director
All Directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. The Executive Committee of the Board of Directors, to
the extent permitted under Utah law, exercises all of the power and
authority of the Board of Directors in the management of the
business and affairs of the Company between meetings of the Board
of Directors. Each executive officers serves at the discretion of
the Board of Directors.
The four principal managers of the Company are:
EDWARD P. SUTHERLAND is the Chairman/CEO and a co-founder of
the Company. Mr. Sutherland received a Bachelor of Arts Degree
from Louisiana State University in 1968, and a Juris Doctor Degree
from Louisiana State University in 1974. He was in private law
practice from 1974 until he co-founded the Company in 1992. Mr.
Sutherland has over 25 years of business, professional and
personnel management expertise in the private and public sector
including over five years of experience in forming, developing and
managing a start-up company in the medical R&D industry. His
background includes strategic planning, financing, administration,
policy formulation and execution, personnel education, general
office management, bookkeeping, taxation, and interface with
governmental agencies including the FDA and the Securities and
Exchange Commission (SEC). While practicing as an attorney, Mr.
Sutherland also developed a comprehensive background in hospital
and medical practice, and product liability litigation.
KERRY M. FREY, President and Chief Operating Officer has over
22 experience in the health care industry. Mr. Frey became an
Officer and a Director of the Company in November 1994. Mr. Frey
received a Bachelor of Arts Degree from Southeastern Louisiana
University in 1969. His background includes marketing and sales,
as well as general management. Mr. Frey was associated with
Johnson and Johnson Hospital Services for ten years in the
development of multi-company corporate marketing programs and
services. He served as Vice President of Marketing as well as VP
of Sales. Mr. Frey has coordinated strategic assessment of the
dynamic healthcare market, including managed care, integrated
provider systems and healthcare reform. He led the development of
corporate value added marketing programs for multi-hospital groups,
large regional hospital systems, surgical supply distributors and
service marketing programs for Johnson & Johnson in the
professional healthcare marketplace. Previous consulting
assignments have included integrated healthcare systems such as the
General Health System and the Florida Hospital; futuristic health
delivery planning with Walt Disney Development Company. He also
consulted for Qualitycare, Inc., a medical distributor company, and
has served on the boards of a medical software company and a start-
up minority distributor.
GARY E. ALEXANDER is the Vice President, Chief Technical
Officer and co-founder of the Company. He is the principle
inventor of SofCeps . and most of the Company s other products and
is in charge of product research. Mr. Alexander received his Juris
Doctor Degree in law from Louisiana State University in 1976 and
was engaged in private law practice from 1976-1991, specializing in
medical liability matters with emphasis on obstetrics. In 1989,
Mr. Alexander conceived the SofCeps product and in 1990 began full
time development of the product. He has spent the last six years
devoting himself to invention, research, and developing of products
for ultimate commercialization. His broad based career successes
began early in 1967 being named the number one Junior Salesman in
the United States for AM Corporation, a source data collection and
conversion company. Mr. Alexander has owned and operated several
businesses in building, general contracting, and construction
equipment sales, where he managed up to 75 employees and sub-
contractors and managed the materials flow accounting, invoicing,
accounts payable and receivable, and exclusive service contracts
with major appliance manufacturers. In connection with those
businesses, he acquired the special skills and expertise in
engineering principles, design, drawings, welding, carpentry,
materials evaluation, electrical and mechanical sciences which have
led to his inventing successes. His background in law resulted in
multiple areas of business expertise including the management of
accounts in the real-estate sector, and he has advised several
manufacturing clients on both domestic and international businesses
contracts, research and development, operations, sales and mergers.
He has also served as advisor and counsel for several financial
institutions and has interfaced with several governmental agencies
including FDA and SEC and has represented the SBA.
The Company s Secretary and Consultant on Intellectual
Property is:
WILLIAM DAVID KIESEL is a Director and a co-founder of the
Company. During the past 25 years he has been actively engaged in
advising numerous start-up businesses. During that period he has
supported more that 100 start-up companies in all aspects of their
businesses, including structuring of R&D programs, financial
planning, management, as well as, marketing and sales of their new
products. These companies have varied in size and encompass
organizations offering a wide spectrum of products, including
medical devices and pharmaceutical products. In addition to his
current position with Medisys, he serves as the business manager of
his own 25 person patent law firm. He has also provided to his
clients fair market and liquidation s evaluations of patents,
trademarks, and other intellectual property. Mr. Kiesel received
from Louisiana State University a B.S. Degree in Mathematics in
1966, a M.S. Degree in Nuclear Engineering in 1970, and a Juris
Doctor Degree in law in 1970. Mr. Kiesel has been a registered
patent attorney and engaged in the private practice of law since
1971 specializing in patent law and related legal areas. Mr.
Kiesel has served as Adjunct Professor at the Louisiana State
University Law School teaching courses in Patent Law.
DR. TIMOTHY ANDRUS became a Director of the Company in
November 1996. He has over seventeen years experience as an
OB/GYN. Dr. Andrus has served as the Associate Director of Gulf
South Health Plans HMO for the past five years. Formerly he was the
Chief of Staff for Woman s Hospital, the seventh largest private
woman s hospital in the U.S., and currently he is on their Board
of Directors.
JANE COOPER became a Director of the Company in May 1996.
Ms. Cooper is the founder, President, and CEO of Healthcare
Advantage, Inc., a regional managed care company headquartered in
New Orleans, Louisiana. Healthcare Advantage offers a variety of
managed care products including Advantage Health Plan, a commercial
HMO and a Medicare HMO, and serves over 325,000 members in eight
states. Recently, Ms. Cooper became an independent health care
consultant. Originally from Wisconsin, Ms. Cooper attended
Augustana College for her undergraduate work and received her
Master s Degree from the University of Illinois. Since 1982 Ms.
Cooper has worked in the managed care industry and has been in
managed care in New Orleans since 1985. Ms. Cooper is on the
executive Committee of the Louisiana Managed Healthcare Association
(LMHA) and is on the Board of Directors and serves as Secretary of
the American Association of PPO s (AAPPO).
DR. ROBERT L. diBENEDETTO a Director and co-founder of the
Company, received his Doctorate of Medicine in 1952 from the
Louisiana State University Medical School and served his internship
at Mercy Hospital from 1952 to 1953, and his residency in
Obstetrics and Gynecology at Charity Hospital, New Orleans,
Louisiana from 1956 to 1959. Dr. diBenedetto has been engaged in
the private practice of Obstetrics and Gynecology from 1959 to the
present and has recently received recognition as one of the top
fifty physicians in the United States. His hospital affiliations
include Woman's Hospital Foundation, Baton Rouge, Louisiana where
he has served as Chairman of the Board of Directors from 1984 to
1990, and he is also affiliated with Our Lady of the Lake Hospital,
Baton Rouge General Hospital and Earl K. Long Hospital. Dr.
diBenedetto is also currently President and CEO of the Louisiana
Medical Insurance Company, a major provider of medical malpractice
insurance. He also serves on the following committees: Chairman,
Dialogue with Congress; Area-wide Health Planning; Liaison with
Organized Specialties; Chairman, Maternal & Child Health; Member,
Committee on Professional Liability of American College of
Obstetrics and Gynecology; Member, Committee on Ethics of
American College of Obstetrics and Gynecology; Past Chairman,
Louisiana Delegation to American Medical Association. His
professional organizations include: Chairman & Legislative
Liaison, Louisiana Section of the American College of Obstetricians
and Gynecologists; Past Chairman, Louisiana Delegation to the
American Medical Association; South Central OB/GYN Society;
clinical Associate Professor of OB/GYN, L.S.U. School of Medicine -
New Orleans, Louisiana; American Fertility Society; Treasurer,
Louisiana Medical Political Action Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Each of the Company's officers and directors is required to
file a Form 5, Annual Statement of Changes in Beneficial Ownership,
on or before the 45th day after the end of the fiscal year. These
reports have not filed on a timely basis and will be submitted to
the Securities and Exchange Commission.
Compensation of Directors
Each member of the Board of Directors is compensated as
follows. Directors each receive 500 shares of common stock for
every meeting attended and will receive 5,000 stock purchase
warrants annually. The Chairman of the Board of Directors will
receive 200 additional shares per meeting. Out of town Directors
are reimbursed for reasonable travel expenses.
Additionally, members of the Compensation Committee will
receive 100 shares per meeting with the Committee Chair receiving
150 shares.
Changes in Control
There are no present or contemplated arrangements, which may
result in a change in control of the Company.
Item 10. Executive Compensation
The following table sets forth all cash compensation actually
paid (and not deferred) by the Company for services rendered to the
Company for the years ended December 31, 1995, 1996, and 1997 to
the Company s Chief Executive Officer, Chief Technical Officer, and
Chief Operating Officer. The total compensation for the remaining
Executive Officers is not reported as it did not meet the threshold
for required reporting.
<PAGE>
Summary Compensation Table
Name and Other All Other
Principal Year Salary Bonus Annual Compensation(1)
Position
Edward P. 1995 $ 118,156 $ -0- $ -0- $ -0-
Sutherland, 1996 150,000 -0- -0- 33,315
C.E.O. 1997 56,621 -0- -0- 17,930
Gary Alexander, 1995 116,526 -0- -0- -0-
C.T.O. 1996 108,000 -0- -0- 34,257
1997 43,771 -0- -0- 17,865
Kerry M. Frey, 1995 -0- -0- -0- 53,000
President and 1996 144,000 -0- -0- 45,553
C.O.O. 1997 52,750 -0- -0- 19,644
________________________
(1) 1997 Other Compensation includes amounts paid in 1997 that relate to
deferred salary accruals from prior years as follows: $17,930 for
Mr. Sutherland; $17,865 for Mr. Alexander; and $19,644 for Mr. Frey.
As of December 31, 1997 the Company has accrued salaries and directors
fees of $290,307 as disclosed in Note 3 to the Consolidated Financial
Statements contained elsewhere in this Form 10-KSB.
Employment Agreements
The Company entered into employment agreements with Edward P.
Sutherland and Kerry Frey on September 3, 1996 and September 4,
1996 respectively, pursuant to which they will receive annual
salaries of $150,000 and $144,000, respectively. These employment
agreements expired on December 31, 1997. Any additional
compensation to these employees is to be in the form of an annual
cash bonus not to exceed 50% of their annual compensation or the
granting of stock warrants or options at the discretion of the
Board of Directors.
No salaries, wages or bonuses have been paid to any of the
officers since April 1997. The officers have voluntarily accrued
their salaries and bonuses on a month to month basis. in
addition, the officers subscribed to the Company's private
placement debenture committing to pay in to the Company a
combined total of $120,000. As of December 31, 1997, $58,000 of
that total had been paid in by the Company's officers.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information, to the best
knowledge of the Company, as of December 31, 1997, with respect to
each person known by the Company to own beneficially more than 5%
of the outstanding Common Stock, each director and all directors
and officers as a group.
Name and Address of Number of Shares Percentage Number of Average
Beneficial Owner Beneficially Owned Ownership Warrants Owned Exercise
Price
Gary E. Alexander *
9624 Brookline Avenue
Baton Rouge, LA 70809 1,367,201(2) 8 % 205,800 $1.61
Robert McNamee
1398 Oakley Drive
Baton Rouge, LA 70806 1,205,826(3) 7 % 358,633 3.31
Jerry Phipps
7530 Old Sturbridge Ln.
Baton Rouge, LA 70806 1,215,826(4) 7 % 473,632 2.91
Robert L. diBenedetto *
781 Colonial Drive
Baton Rouge, La 70806 961,480(5) 5 % 407,000 2.64
William D. Kiesel *
2355 Drusilla Lane
Baton Rouge, LA 70809 1,295,563(6) 7 % 655,166 2.42
Edward P. Sutherland *
9624 Brookline Avenue
Baton Rouge, LA 70809 955,756(7) 6 % 243,000 1.58
Kerry Frey *
9624 Brookline Avenue
Baton Rouge, LA 70809 661,138(8) 4 % 87,400 1.79
Jane Cooper *
9624 Brookline Avenue
Baton Rouge, LA 70809 10,100(9) .01% 5,000 4.25
Timothy Andrus *
9624 Brookline Avenue
Baton Rouge, LA 70809 60,982(10) .03% 44,982 1.14
Directors and officers
as a group (7 persons) 7,773,872(11) 44% 2,480,613 2.49
* Director
** Unless otherwise indicated in the footnotes below, the Company
has been advised that each person above has sole voting power
over the shares indicated above.
(1) As of December 31, 1997, there were 13,120,810 shares of
common stock outstanding, which figure does not take into
consideration stock purchase warrants owned by certain
officers, directors and shareholders, entitling the holders
to purchase an aggregate of 4,564,206 shares of common stock
and which are currently exercisable. Therefore, for purposes
of the table above, as of the date hereof, 17,685,016 shares
of common stock are deemed to be issued and outstanding in
accordance with Rule 13d-3 adopted by the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
as amended. Percentage ownership is calculated separately for
each person on the basis of the actual number of outstanding
shares as of December 31, 1997 and assumes the exercise of
stock purchase warrants held by such person (but not by anyone
else) exercisable within sixty days.
(2) Includes 205,800 shares which may be acquired by Mr. Alexander
pursuant to the exercise of stock purchase warrants
exercisable within sixty days at the average exercise price of
$1.61 per share.
(3) Includes 847,193 shares held in the name of Robert W. and
Geraldine McNamee and 358,633 shares which may be acquired by
Mr. McNamee pursuant to the exercise of stock purchase
warrants exercisable within sixty days at the average exercise
price of $3.31 per share.
(4) Includes 518,362 shares held in the name of Jerry L. and
Barbara D. Phipps and 473,632 shares which may be acquired by
Mr. Phipps pursuant to the exercise of stock purchase warrants
exercisable within sixty days at the average exercise price of
$2.91 per share.
(5) Includes 407,000 shares which may be acquired by Dr.
diBenedetto pursuant to the exercise of stock purchase
warrants exercisable within sixty days at the average exercise
price of $2.64 per share.
(6) Includes 655,166 shares which may be acquired by Mr. Kiesel
pursuant to the exercise of stock purchase warrants
exercisable within sixty days at the average exercise price of
$2.42 per share, of which 300,000 warrants are held in the
name of Roy, Kiesel & Tucker and 10,000 warrants are held in
the name of Nu Vue Corp.
(7) Includes 349,600 shares held in the name of Diana B.
Sutherland, wife of Edward P. Sutherland and 243,000 shares
which may be acquired by Mr. Sutherland pursuant to the
exercise of stock purchase warrants exercisable within sixty
days at the average exercise price of $1.58 per share.
(8) Includes 87,400 shares which may be acquired by Mr. Frey
pursuant to the exercise of stock purchase warrants
exercisable within sixty days at the average exercise price of
$1.79 per share.
(9) Includes 5,000 shares which may be acquired by Ms. Cooper
pursuant to the exercise of stock purchase warrants
exercisable within sixty days at the average exercise price of
$4.25 per share.
(10) Includes 44,982 shares which may be acquired by Dr. Andrus
pursuant to the exercise of stock purchase warrants
exercisable within sixty days at the average exercise price of
$1.14 per share.
(11) Includes 2,480,613 shares which may be acquired by the
Company's officers and directors pursuant to the exercise of
stock purchase warrants exercisable within sixty days at
exercise prices ranging from $1.00 to $4.25 per share.
Item 12. Certain Relationships and Related Transactions
On August 6, 1992 the Company, a publicly traded entity known
as Whitewater Products, Ltd., entered into a certain Acquisition
Agreement and Plan of Reorganization (the "Agreement") with Medisys
Technologies, Inc., a privately held Louisiana corporation
("Medisys-Louisiana"). Prior to entering into the Agreement, the
Company was engaged in only minimal activities and Medisys-
Louisiana was engaged in the research and development of SofCeps.
As per the terms of the Agreement, the Company acquired all the
issued and outstanding shares of common stock of Medisys-Louisiana
in exchange solely for 9,250,000 shares of the Company's authorized
but previously outstanding Common Stock, issued to the shareholders
of Medisys-Louisiana and their designees. Medisys-Louisiana became
a wholly owned subsidiary of the Company and the Company changed
its corporate name to Medisys Technologies, Inc., under the laws of
the State of Utah. For accounting purposes, the transaction has
been treated as a recapitalization of the Company, or reverse
acquisition, with Medisys-Louisiana deemed the acquirer.
The law firm of Roy, Kiesel & Tucker has been used for patent
work. William David Kiesel is a partner of Roy, Kiesel & Tucker
and is the Corporate Secretary and a Director of the Company. Mr.
Kiesel does not bill the Company for his time. However, other
attorneys at his firm do bill the Company for their time and the
Company does reimburse Roy, Kiesel & Tucker for expenses incurred
on the behalf of the Company.
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) Exhibits
*2.1 Acquisition Agreement and Plan of Reorganization.
*3.1(i) Articles of Incorporation and all amendments
thereto
*3.2(ii) By-Laws of Registrant
*4.1 Specimen of Common Stock Certificate
*10.1 Lease Agreement on Registrant s principal place of
business
*10.2 Contract of Employment with Edward P. Sutherland
*10.3 Contract of Employment with Kerry M. Frey
*21.1 Subsidiaries
27 Financial Data Schedule
* Previously filed as Exhibit to Form 10-SB.
(b) No reports on Form 8-K were filed during the three month
period ended December 31, 1997.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEDISYS TECHNOLOGIES, INC.
BY: Edward P. Sutherland
(Signature)
EDWARD P. SUTHERLAND
Chairman and Chief
Executive Officer
DATE: April 15,1998
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
BY: Edward P. Sutherland
(Signature)
EDWARD P. SUTHERLAND
Chairman, Chief Executive
Officer and Director
DATE: April 15,1998
BY: Gary E. Alexander
(Signature)
Gary E. Alexander
Vice President, Chief
Technology Officer and
Director
DATE: April 15,1998
BY: Kerry M. Frey
(Signature)
KERRY M. FREY
President, Chief
Operating Officer and
Director
DATE: April 15,1998
BY: William David Kiesel
(Signature)
WILLIAM DAVID KIESEL
Corporate Secretary and
Director
DATE: April 15,1998
